Federal Reserve Chairman Jay Powell gave another signal on Monday that the central bank is nearing the time when it could start cutting rates, as he said he wants to stay in his job until his term ends in May 2026.
Powell cited a recent turnaround in inflation readings after hotter-than-expected data in the first quarter, including last Thursday’s release of encouraging numbers from the Consumer Price Index for June.
“We didn’t gain any additional confidence in the first quarter, but the three readings in the second quarter, including the one from last week, add some confidence” that inflation is moving toward the Fed’s 2% target, Powell said during an interview at the Club Washington Economist.
The consumer price index on a “core” basis – which excludes volatile food and energy prices that the Fed cannot control – rose 3.3% year over year in June. This was down from 3.4% in May and 3.6% in April.
The Fed gets a new June reading of its favorite gauge of inflation — the “core” Index of Personal Consumption Expenditure — on July 26.
“What’s boosting that confidence,” Powell added on Monday, “is better data on inflation. And we’ve gotten some of that recently here.”
Read more: Consumers catch a break as everyday spending inflation continues to cool
The inflation comments based on guidance Powell gave to Congress last week when he told US lawmakers that inflation numbers “have shown modest further progress” and that “more good data would strengthen our belief that inflation is moves steadily towards 2%.
Powell also reiterated on Monday a point he made to lawmakers that the Fed is now looking at both sides of its mandate — stable prices and maximum employment — as the labor market cools.
That’s another sign for Fed watchers that policymakers are moving closer to cuts. Powell stressed on Monday that if the Fed saw a sudden weakening in the labor market, it would take action.
Market watchers are now betting that rates will be cut at the Fed’s Sept. 17-18 meeting, which is less than seven weeks before Election Day.
The Fed also meets later this month, and some market watchers believe a cut could be in play at that meeting if other pieces fall into place between now and then.
Powell would not budge on Monday’s timing, reiterating a position he took before Congress.
“I’m not going to send signals about any particular meeting,” he said. “We will make these decisions meeting by meeting and the evolving data and the balance of risks.”
Read more: What the Fed’s Rate Decision Means for Bank Accounts, CDs, Loans and Credit Cards
Powell will be under intense political scrutiny in the coming months. Lawmakers signaled last week that they would criticize the central bank if this key September decision does not go their way.
If Powell and his colleagues choose to keep rates at a 23-year high, a growing chorus of Democratic critics calling for cuts could reach a crescendo.
But if policymakers do indeed cut back, Republicans, from Donald Trump on down, are sure to see the move as a bow to election-year pressure.
Powell was asked Monday if he intended to stay until the end of his term in 2026, and he gave a one-word answer: “Yes.”
Asked if he would stay longer if reappointed, he said: “I don’t have anything on that for you today.”
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